Greenway Plaza goes back to lender

The real estate arm of Morgan Stanley has given the keys back to its lender on a portfolio of properties, including Houston’s Greenway Plaza and interests in Post Oak Central and Houston Center, which the company owns with GE and JPMorgan, the Wall Street Journal reports today.

Morgan Stanley turned over the portfolio of more than 17 million square feet of office towers, resorts and hotels which it had acquired in 2007 with a $2 billion loan provided by Barclays. The debt comes due on Nov. 20.

Barclays formed a joint venture with Goff Capital Inc. to take over the properties and named John Goff, co-founder of Crescent before it was sold to Morgan, chairman and chief executive of the new joint venture.

The Morgan Stanley unit had been negotiating to avert a default on the $2 billion loan it used to acquire Fort Worth-based Crescent during the height of the commercial real estate boom.

It gave the company ownership, or interests in, 54 office buildings spread across Houston, Dallas, Denver, Miami and Las Vegas, as well as resort developments and residential land.

The company planned to move the properties into an investment fund, but that sunk when commercial real estate values began to slide, and the real estate remained on Morgan Stanley’s balance sheet.

4 Responses

I have read this article at least 3 times to figure out what is going on with the properties. Another example of a generation of reporters that can not write a clear and concise article. Go twitter somewhere Nancy because you are obviously not paying attention to anything published in the Chronicle. Go figure.

Bill what are you talking about? It seems like straight-forward writing to me. JP defaulted on the loan, the loan was secured by these properties and as such were turned over to the lender Barclays.

You have to talk about JP’s initial purchase of Crescent to understand why the default occurred. JP bought during a boom and now can’t cover the debt payments because rents and occupancy rates are so far down that JP can meet its debt service. Hence this isn’t a sign of JP’s overall health but rather a story of a poorly planned investement. I wonder how much time remained on the leases of the major tenants when JP bought this portfolio of properties

Samir, this has nothing to do with falling rents. There may be a little less leasing activity and vacancy may be up a bit, but overall these properties are healthy and the companies that occupy them are paying their rents on time. Think about it, the largest tenant in Greenway Plaza is Transocean one of the largest energy related companies. The problem here isn’t falling rents, no, its MORGAN STANLEY’s (not JP) inability and likely unwillingness to take out the $2bln in debt that was due. This is purely based on the credit crunch and Morgan not being able to find another lender.

Bill, you need to work on your reading comprehension. To others: commercial real estate is the other shoe that’s dropping. If interest rates rise late next year, look for another recession in early 2011. We will be in big trouble–no room for the Fed to intervene without spiking inflation, and massive government debt preventing a second fiscal stimulus (unless Obama wants a bondholder revolt).